Operations

Improving restaurant food cost margins: Benchmarks, tips and expert insights

Running restaurants is costly, but effective food cost reduction strategies can help operators protect their margins and cut their expenses.

Source: Vitpho for Shutterstock

June 26, 2026 by Amy Sorter — Writer and Editor, Connect Media

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Restaurant operators face a multitude of challenges, not the least of which involve remaining relevant to customers. There's also the struggle of fluctuating ingredient prices, ongoing labor challenges and keeping menu prices competitive.

Under these circumstances, even small increases in food costs can significantly impact margins.

The good news? An effective food cost strategy can help restaurant operators protect profits and reduce waste, resulting in better pricing decisions, said Deloitte's restaurants and food service leader Evert Gruyaert."Forecasting, prep discipline, order accuracy, cleanliness, speed and staff consistency can protect margins while strengthening consumer value perception," he told FastCasual during an interview used to create this roundup of ways for restaurants to cut costs.

Key Takeaways

• Food cost control focuses on more than ingredients; it also includes procurement, storage, portioning, distribution and waste reduction.
• Average food cost percentages range from 28% to 35% but vary by restaurant concept and portion size.
• Food cost differs from prime cost; the latter includes labor costs.
• Inventory management is critical for tracking usage, reducing waste and ordering.
• Supplier relationships and procurement planning can help reduce pricing and improve margins.
• Technology is important for streamlining operations, more precise forecasting and assisting with portion control.
• Menu optimization helps reduce low-performing items and keeps favorites to help improve revenue.
• Staff training helps address cost-saving measures by teaching topics such as waste reduction and portion control.
• Strategic planning and goal setting are essential for owners to align their operations with profit objectives.

This report draws on interviews and research from operators, suppliers and industry organizations, including:

• Matt Harding, chief culinary officer, Piada Italian Street Food.
• Scott Shotter, chief restaurant officer, Teriyaki Madness.
• Sawsan Abublan, founder and CEO, Shawarma Press.
• Chad Hawkes, chief operating officer, la Madeleine
• Go! Food Service.
• Georgetown University.
• Sumkoka.
• Fast Food Pak.
• Restaurant Supplies Direct
• Restaurant365.
• Food & DrinkTechnology
• National Restaurant Association.
• Moskowitz LLP.
• Netsuite.
• Menuworks.
• Meez.

Evert Gruyaert, courtesy of Deloitte

What is restaurant food cost control?

Despite its name, food cost control involves more than managing ingredient expenses. It requires a strategic approach to procurement, inventory, preparation, portioning and packaging.

"Food cost is the report card. It tells you how you performed after everything is said and done," Matt Harding, chief culinary officer with Piada Italian Street Food, told FastCasual.

"It's a lagging indicator that is reviewed weekly or monthly."

Food cost strategy also encompasses everything that occurs before the report, including purchasing decisions, vendor relationships, training, portion control, inventory management and operational execution.

"Food cost is the result of that strategy," Harding said.

What components make up a restaurant's food costs?

The bulk of a restaurant's food costs is tied to the raw materials and ingredients used to prepare meals. Scott Shotter, chief restaurant officer with Teriyaki Madness, told FastCasual that the category would include distribution, beverage and paper costs involved with serving a product.

"Waste or any portioning opportunities are also included in actual food cost," he said.

Food cost factors include:

• Ingredient and condiments
• Beverages
• Waste and spillage
• Takeout containers and packaging

Ingredients and condiments

Ingredients include everything from proteins (beef, chicken, fish or tofu) to produce (fruits and vegetables) to grains (rice and pasta) and more. Condiments include any sauces, seasonings or spices added to a meal to improve its flavor, added during meal prep or by the customer.

"We cross-utilize ingredients whenever possible. Tomatoes, cucumbers, pickles and sauces used in bowls may also be used in wraps, salads and catering trays, which increases inventory turnover and reduces spoilage," Sawsan Abublan, founder and CEO of Shawarma Press, told FastCasual.

Beverages

Chad Hawkes, Courtesy of la Madeleine

Non-alcoholic beverages are a lower-cost item because the ingredients, including soda syrup, water and CO2, are inexpensive. Additionally, preparing these drinks requires little labor or prep time.

Abublan said that Shawarma Press offers premium beverages, including specialty teas and seasonal drinks.

"These products typically generate higher margins, while enhancing the overall dining experience," she said.

Alcoholic drinks, such as liquor and beer, cost restaurants more. Additionally, knowledgeable people should be on hand to mix alcoholic drinks. However, a report from Go! Food Service said that the raw ingredient cost is low when compared to the selling cost.

"A well-trained bartender can produce consistent drinks at scale," the report said.

Some of these extra costs can be mitigated through markups.

Waste and spillage

Restaurant waste is unused food that is discarded. This category includes pre-consumer waste, such as spoiled inventory and post-consumer waste, such as leftovers. According to a Georgetown University study, restaurant food waste shrinks profits by $162 billion annually.

Controlling waste involves measurement, accountability and regular tracking to identify recurring issues, including overproduction, improper preparation or employee error.

Speaking of which, "team members need to understand not only how to execute recipes, but why precision matters," Harding said.

For example, overcooking chicken by 40 degrees can reduce the yield by approximately 10%.

"When employees understand the financial impact of execution, they're more likely to follow procedures consistently and protect margins," he said.

Gruyaert added that preventing waste goes all the way back to forecasting, with demand forecasting, preparation standards and real-time inventory visibility to help reduce overproduction, spoilage and portion variance.

Takeout containers and packaging

Packaging includes materials that are used and then discarded, such as cardboard, plastics, paper and aluminum. Plastics top the list of materials used, followed by paper and aluminum.

Packaging costs differ, depending on the restaurant type and food distribution methods. Restaurants that deliver might incur higher packaging costs. One report said that the food service industry can spend between 8% and 10% of its total operating costs on packaging used for takeout.

"More and more of our food is sold off-premise, so packaging becomes a more critical cost," Chad Hawkes, la Madeleine's chief operating officer, told FastCasual.

Sawsan Abublonm, Courtesy of Shawarma Press

Suggestions to reduce these costs include better inventory planning, standardizing container sizes, selecting cost-effective materials (paperboard for dry items and generic plastic for salads) and eliminating unnecessary extras such as condiments, napkins and utensils.

What is the ideal restaurant food cost percentage?

The calculation to determine a food cost percentage is:

Total Cost of Goods ÷ Total Food Sales x 100

Reports suggest that the benchmark food cost percentage should be between 28% and 35% of total food sales.

However, "this varies so much from concept to concept," Hawkes said. "What truly becomes an ideal food cost is that point at which the restaurant can return a healthy and sustainable EBITDA and provide a product that elicits demand from their customers."

Shotter agreed, explaining that while the food cost percentage might range from 25% to 30%, it can be higher depending on portion size.

How does food cost differ from prime cost?

Food cost calculates everything involved with preparing and distributing meals. The prime cost takes this one step further by adding total labor costs, including salaries, benefits, and taxes. A restaurant with a lower food cost can struggle if its labor costs are too high.

"Fast casual restaurants look to balance their prime costs between 55% and 58%, on average," Shotter said. "This allows them to provide quality menu items within a limited service environment."

6 effective strategies to control food costs

A restaurant owner's food cost is a variable and sometimes unpredictable expense. However, proper planning and a deliberate strategy can help reduce that expense.

"The two most controllable costs that operators can have an effect on are food costs or cost of goods sold, and labor," Shotter said.

Scott Shotter, Courtesy of Terkiyaki Madness

Six strategies to control food costs also include:

1. Inventory management
2. Cost analysis and reduction
3. Operational efficiency and technology
4. Menu optimization
5. Staff training and management
6. Strategic planning and goal setting

Inventory management

Inventory management means tracking usage, reducing waste and optimizing ordering processes. Operators can optimize stock levels using yield management, maintain accurate inventory counts, monitor raw material quality and streamline ordering. Other activities should maintain accurate inventory accounts and implement FIFO for efficient inventory rotation.

Gruyaert recommended systems that connect inventory, point-of-sale, labor, purchasing, supplier and recipe data. Abublan agreed, saying that helpful tools in such a system include supplier integration and mobile inventory counting.

Additionally, "implementing a back of house inventory management system to track actual versus theoretical costs should be complemented with utilizing predictive or AI to help forecast everything from ordering, prep, scheduling and sales," Shotter said.

Harding said that his operations use Restaurant365 for management, because it consolidates inventory, invoicing and financial reporting.

"We also utilize EDI invoicing, which allows invoices to flow directly into the system, helping us quickly identify pricing discrepancies, receiving errors or inventory issues," he said.

Cost analysis and reduction

Examining costs involves knowing where they come from, then figuring out how to cut them. To achieve these goals, restaurant owners and operators may track expenses to assess food costs accurately, control portions to minimize waste and boost profits and monitor actual versus theoretical food costs for accuracy.

At the same time, artificial intelligence is making its way into everything from food preparation to waste reduction. Deloitte's AI in Restaurants Survey found that 25% of executives are testing various AI applications for inventory, food prep and waste management.

"IoT sensors and predictive analytics can help operators know what to prep, when to cook and how much to order, reducing waste while improving freshness and speed," said Gruyaert, who helped author the report.

"Computer vision can be used to analyze waste to further optimize ingredients and portion sizes."

Supplier and procurement

Matt Harding, Courtesy of Piada Italian Street Food

Tapping suppliers to help control costs is also a valid strategy. To do this, negotiate competitive prices and terms, build strong supplier relationships and leverage group purchasing for savings.

Abublan said that Shawarma Press consolidates purchasing across multiple locations to help leverage greater buying power.

"Suppliers are often willing to provide better pricing, rebates or fixed-contract pricing when they can serve multiple units through a single relationship," she said.

Also essential are ensuring transparency with vendor contracts, while having a disciplined approach to pricing and a clear understanding of cost structures

Operators should know exactly what they're willing to pay, and monitor fees that can quietly increase costs, such as fuel charges," Harding said.

Operational efficiency and technology

Operators are increasingly relying on technology to automate processes for efficiency gains. Software is also available to help with portion control for cost-effective servings. One such tool currently undergoing beta testing is an automated system that combines camera-based computer vision with machine learning models to assist with reducing plate waste and achieving more effective portion sizes.

According to the National Restaurant Association, 26% of operators said they use artificial intelligence tools in their stores. Additionally, 19% of full-service operators and 15% of limited-service operators said that AI assists with their marketing functions.

"Operators need data and information provided to them, so they can stay up front driving sales and working alongside their teams on execution," Shotter said.

Menu optimization

Menu optimization involves analyzing data to figure out popular versus slow-selling items. It helps control costs by removing low-profit items, or "dogs," while pricing items strategically for revenue maximization. However, there's more to strategic menu optimization than moving some things around and deleting others. There's the psychology of menu design that helps guide customer choices. For example, the "Golden Triangle" describes how customers scan a menu. Studies show that the center, top-right, and top-left corners of menus are noticed first.

Other tools to help with menu optimization include using sensory words, offering a smaller set of profitable and appealing dishes, creating visual cues and strategically using colors to guide physical responses.

Staff training and management

Staff training remains essential and should include cost-saving practices and a built-in method to evaluate staff performance for efficiency. What's changing is how the training takes place.

"Training is shifted from episodic to embedded," Gruyaert said.

"Formal classes and certifications still matter, but restaurants increasingly should consider on-the-job coaching, digital task guidance, short-form mobile learning and manager-led reinforcement."

Abublan said that Shawarma Press has a layered training approach that combines formal instruction and ongoing reinforcement. New members are educated through an online learning management system and trainers, covering topics such as food safety, operating procedures and product preparation.

When it comes to continual staff management, "we rely on hands-on coaching, mentoring and periodic retraining to reinforce standards," she said.

Harding added that operators should regularly evaluate product quality with their teams and ask questions.

"While short-form training content can be effective, nothing replaces in-person coaching and reinforcement from experienced leaders," he said.

Strategic planning and goal setting

Setting measurable goals for the cost-savings process and working to forecast sales to manage costs effectively are essential parts of the strategic planning necessary to pull everything mentioned above into a single cost-reduction package. For example, tracking food costs in relation to total food sales helps operators compare their performance against industry standards. Yield and demand management help operators determine how many ingredients to order for specific menu items.

Additional key performance indicators, such as labor cost percentage, food and beverage cost percentage, loss & server errors and table turnover rate, can provide an in-depth look at how well (or not) a business is performing.

"Forecasting, prep discipline, order accuracy, cleanliness, speed and staff consistency can protect margins while strengthening consumer value perception," Gruyaert said.

Conclusion

Operators who understand cost drivers, regularly monitor inventory and ensure that teams have clear guidance to follow are in a better position to maintain profitability through expense reduction. Even small changes focused on portioning, supplier negotiation and menu offerings can generate savings.

Even though food cost strategy should consist of a well-thought-out plan, there should be plenty of room for flexibility and changes.

"Many of the best operational practices originate in the field," Harding said.

Overall, restaurant cost control can help owners protect their margins and cut expenses. This, in turn, can help provide resources to address customer needs while focusing on expansion.

"Operational best practices create consistency, scalability and profitability, all of which are essential for long-term growth," Abublan said.

About Amy Sorter

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Amy W. Sorter is an award-winning journalist, copywriter and content producer. Sorter has generated quality articles, blogs and thought leadership pieces for multiple industries during her many decades as a writer. Her byline has appeared in local and national publications including the American Business Journal, Connect CRE, Bankrate, CURE Magazine and the Dallas Morning News.

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